Earlier this year, the Government passed a law to introduce a new director identification number (DIN) requirement.
It is said this will not commence until June 2022 however it is well worth while being prepared and understanding its purpose.
The DIN and why is it being implemented?
A DIN is a unique identifier number to be issued to each person who is a director or acting alternate director of a company or the equivalent role (such as a management committee member) of some incorporated associations.
Once a person’s identity has been confirmed, they will be issued with a single DIN which they will keep permanently even if they cease being a director, change directorships or act as a director for multiple organisations.
DINs are being brought in to try and control ‘phoenixing’.
"Phoenixing describes the process where directors transfer all the assets of one company to a new company for little or no consideration and carry on the same business as the old company through the new company, usually in circumstances where the old company is in some form of financial distress. A phoenix, as taken from mythology, rising from the ashes of the old company.
DINs are expected to reduce phoenixing by ensuring directors can be properly traced between organisations and by preventing the use of fake identities. The introduction of DINs is also expected to promote good governance, streamline general corporate administration and improve data integrity and security." Source1
Who will be required to have a DIN?
Once the DIN requirement takes effect, all directors, acting alternate directors and management committee members of ‘registered bodies’ will require a DIN. Registered bodies are:
companies, registered foreign companies, or registered Australian bodies (such as incorporated associations with an Australian Registered Body Number (ARBN)) which are registered under the Corporations Act; and
Aboriginal and Torres Strait Islander corporations which are registered under the CATSI Act.
Initially, officers that are not directors and de facto or shadow directors will not be required to have a DIN. However, the law leaves flexibility for this in the future. Source1.
. Will directors of charities and not-for-profits need a DIN?
Yes - All directors of NFP registered bodies (including charities registered with the Australian Charities and Not-for-profits Commission) will be required to have a DIN.
When do Directors need to have a DIN by?
A the moment it is to start on the 22nd June 2022. However for new appointed directors will be given a further 28 days to apply for their DIN.
What happens if a director does not get a DIN?
Criminal and civil penalties will apply to those that do not obtain a DIN. Fines as high as $200,000.00 are said to be implemented.
For further information visit: https://www.abrs.gov.au/director-identification-number/apply-director-identification-number
Source : 1 www.gtlaw.com.au